Why your bank doesn't have the best business credit card

Why your bank doesn't have the best business credit card

  • 40% of Australians have been with the same bank since childhood and that means they are likely paying a ‘lazy tax’.
  • If you apply for a credit card with your current provider you might not get the sign-up bonus bonus.
  • Any time you’re looking for a new business credit card, you need a ‘complete picture’ – that includes not just the rewards and interest rate, but your liability, and any associated fees and complimentary benefits like insurance.

Too often we find it easier just to go with the simplest option. Whether it’s ordering takeaway after a long day at work or procrastinating about doing the washing up. And when it comes to finances, it’s sometimes just easier to go with what you know.

Around 40% of Australians have been with the same bank since childhood (Dollarmites, anyone?), but Money magazine suggests these loyal Aussies should review their banking options, raising concerns about being subject to a ‘lazy tax’.

And with increased scrutiny on the finance sector following Kenneth Hayne’s Royal Commission report, it’s high time Aussie business owners stepped outside their comfort zone and researched what’s actually the best financial option for them.

After all, just because you’ve been loyal to a bank doesn’t mean they’ll be able to provide you with the rewards you’re looking for, especially when it comes to your credit card.

Just like personal cards, the choice is yours

One of the major ‘perceived’ barriers to switching banks, whether that’s your savings account, your mortgage lender or your credit card, is the effort involved. Many people spot a great deal and think about switching, but then when it comes time to actually make the switch they chuck it in the 'too-hard' basket.

But thanks to the ease of jumping online and finding the right product for you, that’s no longer the case. Choosing a new credit card provider, for example, is as simple as filling out your details online and waiting for approval. What’s more, the ‘effort’ of taking a few minutes out of your day can be rewarded with fantastic deals that meet your unique business needs.

The most important thing to remember here is that ‘loyalty’, at least as the average person sees it, doesn’t factor into the equation for the actual providers. They’ll still have customers whether you decide to stick with them or not, and you won’t end up with any extra bonuses for your loyalty.

The choice is yours: so forget about there being any stigma attached to making a switch. Your credit card absolutely doesn’t have to be from the same provider as your business banking account. Just like with your personal credit card, you’re free to pick and choose.

You’re probably missing out on the best deals

Businessman with credit card in the car

Like most decisions, there are pros and cons for both sides. So what’s in it if you decide to stay versus finding a credit card from a different bank?

Sticking with a credit card from the provider your business banks with:

  • You already know the ins and outs: Since you’ve already set up your business account with this bank, you’re familiar with all their services, current offers and how receptive the customer service team is to your needs.
  • Applying is easy: You’ve likely gone through the application process of opening up a bank account, getting a business loan or setting up a credit card for personal expenses. The lender will also already have your banking and credit history handy, so from the application stage through to approval, things will probably run very smoothly.

Getting a business credit card from a different provider:

  • Competitive deals: The biggest problem with only choosing a credit card from your current bank? The lack of diversity. You’ll more than likely miss out on a more competitive deal from another provider. Using a credit card comparison site is the best way to see what’s on the market. Make sure you pay attention to all the important stuff: annual fees, interest rates, rewards programs, insurance, and other business perks.
  • Promo offers: When applying for a credit card with a different provider, you’re privy to sign-up bonuses that could pack some serious heft. That might include interest-free months on balance transfers, zero interest on purchases for a set time, and plenty of other rewards to sweeten the deal. These sign-up bonuses usually aren’t available to current customers, so it’s one more reason to go with a different provider!

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What matters most to you?

Especially when it involves a business credit card, what matters most is your specific needs. So ask yourself: how will each of these credit card options impact my business?

As a business owner, your bottom line is far more important than any perceived loyalty to a single bank. So don’t just look at what your bank’s credit cards are offering and see how they could fit into your business goals. Instead, flip it: work out what your business wants to achieve and then search for a credit card that has rewards and offers that line up with your objectives.

So what matters most to your business?

  • Frequent flyer points: If you usually fly Virgin for business travel, the American Express Velocity Business Card earns you 2 frequent flyer points for every $1 spent on Virgin Australia services and 1 point per $1 for all other purchases. There are also plenty of cards for other airlines like Qantas.
  • Rewards program: Prefer to build up your Amex status through the Members Rewards Ascent program? The American Express Platinum Business Card currently offers 100,000 points when you sign up before a set date and spend $5,000 within the first two months – quite a small requirement considering the standard monthly outgoings of most businesses.
  • Low annual fees: If you’re still in the startup phase and margins are tight, a low-fee card might be your best option. The NAB Low Rate Business Card has a $0 annual fee for the first year, then $60 thereafter – still a seriously low fee compared to most other business credit cards.
  • Long interest-free period: Similarly, interest-free days can help you manage your business cash flow better. The American Express Business Explorer Credit Card offers up to 55 days interest free and also earns you points for every dollar you spend on eligible purchases.

Man working on a laptop

Things to consider

No matter who you end up going with for your new business credit card, it’s crucial that you take the time to conduct proper due diligence and ensure you are getting exactly what you need.

Ask yourself the following questions when comparing cards:

  • Does it meet all my needs? So the interest-free period is great and it links to your favourite rewards program – but what about the fine print? If the annual fee will end up costing you more than you’ll get out of the card, it won’t be worth it in the long run.
  • What should my credit limit be? Considering your current income and outgoings, how much can you afford to repay each month? Build in your expenses and any of the card’s additional factors (like interest rate and annual fees) to create a complete picture. From there you’ll have a better idea of what limit you should set.
  • How will the interest rate affect me? Especially if you only plan to repay the minimum amount, the card’s interest rate will have a massive impact. So consider whether a high interest rate but a great rewards program will balance itself out. In any event, if you pay off the complete balance every month, you won’t have any compounding interest to worry about.
  • Do I understand all the different fees? Business credit cards don’t just have an annual fee. You’ll also need to understand the cost of late payments and any cash advance fees (if you withdraw cash using the credit card).
  • What’s my liability? Business credit cards usually make the person who applies for it personally liable, unless the business is incorporated. In this case, make sure you clarify who will be ultimately responsible: the business as a whole, or you as an individual. Also take into account how many of your employees will have access to the credit card. That could potentially raise your risk.
  • How can I use this card to the greatest advantage? The whole point of finding a business credit card should be to maximise its benefits. In addition to rewards programs, frequent flyer points and low interest rates, find out whether you get any other benefits like complimentary travel insurance.

Always get the card that’s best for you

Sure, there are cases where someone decides to go with a card from their current bank and it makes their lives a whole lot easier. One New York business owner applied for a business credit card at the same time she opened her business bank account, which made the entire process streamlined. And that makes sense.

But it’s the exception rather than the rule – and it’s not the same as applying for a credit card from the bank you already use for your business account. The chances of you finding the best possible deal with your current bank are slim. After all, they create all the benefits for their cards without your input. So why wouldn’t you compare what’s available and go with the card that’s right for your business needs?

The stigma attached to ‘shopping around’ needs to disappear. There’s nothing wrong with finding out what else is on the market and then choosing the best option. Rather, the business owners who aren’t shopping around are the ones who will ultimately miss out on the best credit card deals.

The choice is always yours, but in our opinion? It pays to compare.